Earlier quoted context omitted.
>If everyone pays higher wages, there's a greater supply of money for buying stuff / solving problems (assuming the higher wages aren't eaten by rents). No individual form recoups all of the higher wages they pay their workers, obviously, but there's a larger market for the goods of everyone has more money. Does this actually work? Suppose you're on an island where the economy only produces coconuts. How does giving…
This is how we had a major boom in middle-class wealth int he US post WW2. If you are only selling coconuts, a single raw material, yes, you will run into supply constraints such that prices go up. But that isn't how economics works. Your zero-sum economics example is only applicable in short-term scenarios: over the longer term, new industries develop to solve persistent problems that people are willing to pay to so…
The fact that Europe got bombed no doubt helped too, same with the elites being concerned that communism was on the rise and giving workers a better deal in an effort to stave that off.
>Your zero-sum economics example is only applicable in short-term scenarios: over the longer term, new industries develop to solve persistent problems that people are willing to pay to solve.
>Money solves the problems of the people that have the problems. If the problem is 'we need to eat', producers will diversify into new food sources to meet the demand, solving the problem, and capturing the money of the people who have that problem.
I'm not how you got the impression that I thought the economy had to be zero sum. I even specifically mentioned the possibility of more stuff to go around if productivity goes up. That's the problem with your "new industries develop" argument. Unless productivity goes up too, there will only be different stuff, not more stuff overall.
>There is an enormous space of problems people have which cannot be solved due to lack of access to money. Increasing costs in childcare, elder care, and education are good examples.
All of those are service industries that are resistant to scaling, and as a result productivity growth have been abysmal. Giving people more money to spend on those things just means productive capacity is removed from the economy elsewhere. Going back to the coconut economy example, it would certainly be nice if workers could have a maid to do the cleaning or a chef to do the cooking, but you still need people do the cleaning or cooking. At the end of the day you're just shuffling people around, not growing more coconuts.